The online-retail trend is not what you think

Commentary: Amazon.com of 2009 is the Sears, Roebuck of 1893

BERKELEY, Calif. (MarketWatch) -- In the late 1990s before the dot-com crash, the litany of hope regarding the Internet tended toward the notion that it was the be-all and end-all for commerce. Bricks and mortar would be replaced by the actualization of the catchphrase "clicks and mortar."

Of course, "clicks and mortar" was an idiotic concept since there really wasn't supposed to be any mortar. (There was FedEx, UPS and the U.S. Postal Service, though.)

The online retailer is just a modern version of an old idea: the catalog and direct-mail business that has been a tradition in the United States since the Civil War. It should be thought of and treated as such. Amazon.com Inc.
AMZN, -0.01%
of 2009 is the Sears, Roebuck of 1893.

This last Christmas buying season showed a 9% year-over-year retail gain, according to the Brick Group. See more retail data.

But if you break out the storefronts, that was only up 4.9%. This means the rest was picked up by mail order and online sites.

Most reports of online sales indicate gains of 15% to 20% from last year, and last year the online businesses were outpacing storefronts too.

I've run into numerous people who say that this year they did all of their Christmas shopping on Amazon. Amazon has evolved into a general-purpose merchant, coordinating the sale of almost anything.

This immediately brings about gloom-and-doom predictions for storefront retailers. In 1893, when the first Sears, Roebuck catalog came out, I am sure the pundits were predicting the end of stores as well.

It must be noted that a societal shift is taking place regarding online sales, but it is a paradigm shift from mail order, not from actual storefronts. I myself buy almost all my books, CDs, blank media, picture frames, office supplies and so on online. When I look at the list, however, it doesn't go much further than that.

For example, I do not buy olive oil online; I do not buy clothes online. While there are people who always have bought clothes from catalogs and can as easily buy online, that's not exactly a trend -- it is a class of customers changing channels.

Online-only threatens the catalog business, and as some catalog operations folded, others have tried to transition to an online sales model. They know they are probably as doomed as printed newspapers.

The reason all this is important is because the mail-order business generally has been exempt from onerous, individual state income taxes, unless the firms were actually doing storefront business in the state in question.

People used to squawk about the mail-order tax advantage only once in a while. These complainers usually were state governments trying to find more ways to take money from their citizenry. It was never the storefront competitors complaining about the unfair tax advantage that mail order had over local retailers.

So how is this different than the Internet sales? It's the exact same situation as catalog and mail-order companies.

Make no mistake, the online retailer is replacing the mail-order company and not the storefront, no matter how the numbers stack up. Don't be tricked into thinking online merchants have any more of a tax advantage than the direct-mail folks have had over the years. They don't.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.